Are Shocks to Air Passenger Traffic Permanent or Transitory? Implications for Long-Term Air Passenger Forecasts for the UK

An important question facing air transport forecasters and developers of airport capacity in the UK is how robust is air passenger traffic to exogenous shocks such as, for example, September 11 and the second Gulf war. To address this question, this paper analyses statistical properties of air passenger traffic data for the UK and four other major developed aviation markets (Australia, Canada, Germany and the US), using time series methods. The evidence for the UK, Germany and Australia indicates that shocks to air passenger traffic are largely transitory and do not, in general, merit revision of forecasts over a long horizon. The exception is the shock associated with 1970s oil price rises, and the concurrent worldwide economic recession, which is found to have had a long-term impact on air passenger traffic growth in these countries. The US and Canada have also experienced a marked slowdown in traffic growth since the 1970s, but the evidence for these two countries is not consistent with a characterisation of shocks as being transitory fluctuations around a stable growth path. © 2006 LSE and the University of Bath